# EUR-Lex - 52013DC0711 - EN

*|*

# 52013DC0711

**COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Long term infrastructure vision for Europe and beyond /* COM/2013/0711 final */**

			*

			*

COMMUNICATION FROM THE COMMISSION TO
THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL
COMMITTEE AND THE COMMITTEE OF THE REGIONS

Long term infrastructure vision for Europe and beyond

1.         Introduction: stock-taking
and challenges

Adequate, integrated and reliable energy
networks are a crucial prerequisite not only for Union energy policy goals, but
also for the Union's economic strategy. Developing
our energy infrastructure will allow the Union to deliver a properly
functioning internal energy market, enhance security of supply, enable the
integration of renewable energy sources, increase energy efficiency and allow
consumers to benefit from new technologies and intelligent energy use. Energy
infrastructures are also indispensable to make the transition into a
competitive low-carbon economy happen.

The European energy system is in transition.
Whilst the short term priority is to complete the internal energy market
by developing the missing interconnectors, ending the isolation of a number of
Member States and by removing internal bottlenecks, the
energy infrastructure planned today must, at the same time, be compatible with
longer term policy choices.

Different decarbonisation scenarios imply different energy mixes and thus different infrastructure
requirements. The Energy Roadmap 2050 outlines different scenarios how to ensure
a more competitive and secure energy system while meeting the challenge of
reducing carbon emissions by 80% in a 2050 perspective and provides a strong
policy signal. It also identifies investments in increasingly smart and
flexible infrastructures as one of the no-regret options. The Commission is
currently preparing concrete proposals for a post-2020 framework for climate
and energy policies.

Tackling the challenges of increasingly
variable low-carbon generation while maintaining high standards of security
of supply is far cheaper if done at European level through integrated markets,
for which adequate infrastructures are a prerequisite, compared to the overall
cost of fragmented national policies. In the longer term, high-voltage long
distance and new electricity storage technologies must be developed to
accommodate ever-increasing shares of renewable energy, from the Union and from its neighbourhood.

It is crucial to improve the diversification
of gas supplies so that no Member State would be dependent on one single
supply source. It is also important to significantly increase the gas system's
flexibility and resilience in the short and medium term to support gas' role as
a back-up fuel for variable electricity generation while keeping in mind
the Union's long-term decarbonisation objective, but also to be able to benefit
from the recent developments in the LNG markets, biogas and unconventional
resources, in particular in the US. A well-integrated gas network is
also the best guarantee to compensate for a possible failure of the largest gas
infrastructure in any Member State, an obligatory standard introduced by the gas
security of supply regulation[1].

It is estimated that up to 2020 about 200bn
euro investments are needed to upgrade and expand European energy networks to
make them the central enabler of all our medium and long-term policy goals.
This impressive figure, however, can entail important savings of up to 40-70bn
euro[2] on an annual basis by 2030 in
terms of avoided generation costs and more competitive gas wholesale prices,
translating into 7-12 euro savings in the monthly bills. This could
greatly contribute to counterbalance the increase of energy prices and improve
the Union industries' competitiveness.

The long-term energy infrastructure policy was
first outlined in the Communication on Energy infrastructure priorities for
2020 and beyond – a blueprint for an integrated European energy network[3] and successively enshrined in
the recently adopted Regulation on Guidelines for trans-European energy
infrastructures[4]
(TEN-E Guidelines) which identify nine strategic geographic infrastructure priority
corridors in the domains of electricity, gas and oil, and three Union-wide
infrastructure priority areas[5]
for electricity highways, smart grids and carbon dioxide transportation
networks, the implementation of which is the Union's common short and long-term
priority.

This Communication outlines a long-term
vision for a pan-European energy infrastructure. The first set of Projects
of Common Interest (PCIs) is an important step towards the better integration
of Member States' networks and making sure no Member State remains isolated, in
facilitating integration of renewable energy sources across the Union, in
diversifying sources of gas supply by opening new gas corridors, and in
offering alternatives to Member States dependent on a single source of oil or
gas supply.

But much more still needs to be done. The first
Union list of PCIs is just the first step towards the implementation of the
longer term infrastructure vision. The PCI list will be reviewed every two
years with a view to integrating new projects, so as to fully implement the
twelve priority corridors and areas in the direction of the long-term vision of
a pan-European market integration and low-carbon transition. In particular, the
Union must make sure that the remaining energy islands are integrated as soon
as possible, but also that the emerging Northern Seas off-shore grid is
expanded and further developed through the electricity highways into a truly
pan-European electricity system. At the same time, the Union must make sure
that the neighbouring countries are effectively integrated with the Union through adequate infrastructure networks and regulatory frameworks in line with the
strategy outlined in the Communication on security of energy supply and
international cooperation[6].

2.         Union list of projects of
common interest

As a first step to the implementation of
the TEN-E Guidelines, the Commission has adopted, under the delegated act
procedure, the Union list of about 250 projects of common interest[7] in electricity and gas
transmission, storage and LNG, as well as in smart grids and in oil. This first
list is based on the intensive work of twelve regional groups, which brought
together the representatives of the Member States, national regulatory
authorities, project promoters as well as the European networks of transmission
system operators for electricity and gas (ENTSO-E and ENTSOG), the Agency for
Cooperation of Energy Regulators and the Commission.

The majority of the projects of common
interest are in the field of electricity, prevalently transmission lines,
fourteen storage projects and two smart grids projects. They will contribute to
the better integration of the internal electricity market, enhance the
preparedness of the grid to take up increasing amounts of energy from variable
renewable sources and maintain system stability at the same time. While the
Union will come closer to the achievement of the 10% electricity
interconnection target advocated by the Barcelona European Council in
2002, still more projects need to be identified for the true integration of the
 Iberian Peninsula within the European market.

The implementation of the projects of
common interest in the field of gas will allow the Union to diversify
its gas sources, end the single source dependency of several of its Member States
and also increase choices and reduce uncertainty in the market. The opening of
the Southern Gas Corridor through the Trans-Adriatic Pipeline as of 2018 is an
important milestone. It must be complemented by timely implementation of the
other projects identified, notably the Trans-Anatolian Pipeline, in order to
enhance security of supply throughout the region and by further diversification
by tapping on the gas resources in the Eastern Mediterranean region.

The timely implementation of the
projects of common interest is a common priority.
That is why the TEN-E Guidelines introduce strict requirements on the permit
granting process for PCIs, including binding time limits for the permit process
(in general 3.5 years), the establishment of a national 'one-stop-shop' for
permit granting, early and effective public consultations and a requirement for
the Member States to streamline environmental assessment procedures. These
requirements are aimed at accelerating the permitting process, whilst
respecting the strict standards of the Union environmental acquis. The Commission
services dealing with energy and environment have jointly prepared a guidance
document[8]
in order to support Member States in defining adequate legislative and
non-legislative measures to streamline environmental assessment procedures and
to ensure coherent application of these procedures required under Union law
with regards to PCIs.

The Union list contains PCIs in different
stages of their development. Some are still in the early phases, therefore
studies are still needed to demonstrate that the project is feasible. The
inclusion of such projects in the Union list of PCIs is without prejudice to
the outcome of relevant environmental assessment and permitting procedures. If
projects included in the Union list of PCIs turn out not to be in compliance with
the EU acquis, they should be removed from the Union list.

A sufficiently attractive framework for
long term financing, including adequate regulatory incentives and long-term
regulatory certainty (incl. cross-border cost allocation) is a
pre-condition for infrastructure development. The sector is fundamentally
changing and requires accelerated investment pace which poses high cash flow
needs. The evaluation methods by investors will need to adapt to successfully
reap such investment opportunities and contribute to the future. The Connecting
Europe Facility will play a key role in leveraging the necessary private
and public funding.

Next steps for PCIs:

• Launch an investors' dialogue to promote investment in European infrastructures to attract the necessary financing from the global capital markets

• Monitor the appointment of national one-stop-shops (starting December 2013)

• First call under the Connecting Europe Facility in 2014

• Monitor the implementation of the permit granting measures

• Monitor closely the implementation of the PCIs (first reporting in 2015)

3.         Remaining challenges and
longer term infrastructure vision

The projects of common interest identified
in this first round mainly focus on completing a borderless internal energy
market, with only few projects of common interest affecting neighbouring
countries or beyond. Once the internal bottlenecks are being removed, the Union
can effectively engage with and provide a larger market place for energy
produced and consumed in the Union and in the neighbouring countries. Every
two years, the process of project identification will be launched to cater for
new emerging projects geared to fulfil future needs.

Further work must focus on integration of ever
increasing shares of energy from variable renewable sources while maintaining
security of supply and minimising the risk of stranded assets. In electricity,
about 40% more transmission capacity is needed by 2020 to fully reap the
benefits of integration compared to 2010 and this pace is not expected to slow
down in the subsequent decade (105% to 146% additional capacity needed compared
to 2010 levels, depending on the policy scenarios)[9]. One of the main challenges for
the mid- and long-term is to further understand and plan the interaction
between the different grids, the electricity and gas systems, as well as
transport of carbon dioxide, and to improve cross-sectoral coordination and
optimisation. We know that the increasing variability of electricity generation
from renewable sources poses a flexibility challenge also for the gas system,
which could provide not only important back-up generation, but in the future
also large-scale electricity storage. These interactions need to be taken into
account in future pan-European infrastructure planning.

One of the objectives of the Union is to further improve interconnections with neighbouring countries. Already
this first list of projects of common interest includes some links to non-Union
countries, while there is increasing possibility in the future to identify more
and more such projects either as projects of common interest or projects of
mutual interest, for the latter of which the policy and – if needed – legal
framework still needs to be explored and developed.

Similarly to the PCI process within the Union, the Energy Community has also engaged in the identification of so-called Projects
of Energy Community Interest (PECIs) which are scheduled for adoption by
the Ministerial Council in October 2013. The candidate projects for this list have
been collected via an open call for proposals and have been assessed by a
dedicated Task Force of the Energy Community against a set of criteria very
similar to those of the PCIs (security of supply, market integration,
enhancement of competition and facilitation of renewable energy use). Due to
the geostrategic importance of its Contracting Parties and its continuous
progress towards the integration with the internal energy market, the Energy
Community plays an important role in the Union's infrastructure planning. The
decision of the Ministerial Council on the list of PECIs will deliver the much
needed political endorsement, with a view to facilitate their regulatory
treatment and to provide a positive signal for potential investors. The
completion of the PECIs is key for market opening, security of supply and
sustainability in the wider region.

In May 2012, the "MED-TSO"
has been established as a platform for the co-operation of transmission system
operators around the Mediterranean to work better towards the objective of
developing a master plan for an integrated network in the South and for linking
the electricity systems of both sides of the Mediterranean along three route
paths in the Western, Central and the Eastern Mediterranean area. This
Infrastructure Master Plan, which will include the identification of a set of
priority infrastructure projects that will be conducive to the goal of more
integrated Mediterranean electricity systems, will be presented by the
Euro-Mediterranean Ministerial meeting on energy in December 2013.

(a) 
Remaining priorities in electricity

In electricity, the areas which will
require further projects and technological development are:

– 
Further increase the interconnection level
between the Iberian peninsula and the rest of the continent to fully
benefit from an optimal allocation of electricity generation from renewable
sources. In the longer term, further connections with Northern African
countries should be explored.

– 
Implementation of the Baltic energy market
interconnection plan, with the future synchronisation of the
Baltic electricity system with the ENTSO-E system.

– 
Further expanding a truly meshed off-shore
grid in the Northern Seas. While the current list of projects of common
interest does include about 20 interconnectors and relevant internal
reinforcements, there is only one grid-ready off-shore hub involving
anticipatory investments as a forerunner for the future integrated off-shore
grid. The technology challenges are being pursued by major manufacturers in
this area. The design and coordinated development and management of the future
meshed grid and storage solutions, as well as appropriate regulatory and
financing solutions remain to be developed. The abundant geothermal storage
resources in Iceland should also be looked at in the longer term.

– 
More and more electricity will have to be
transported over increasingly longer distances within and from outside Europe. Removing or preventing bottlenecks through the construction of high-capacity electricity
highways remains a focus for the future. Such electricity highways would
include links beyond the Union borders, connecting the Energy Community, Turkey, Russia as well as the North African and Eastern Mediterranean countries with the Union, as well as links to import electricity from the sub-Saharan area in the longer term,
while also taking into account the possible evolution of distributed generation
and demand-response. While some of the PCIs, such as the German North-South
connections, may be considered as forerunners for this priority area, the
design and coordinated development of Union-wide electricity highways as well
as the technological challenges remain to be solved.

– 
The first PCI process has identified only two
projects in the field of smart electricity grids which intelligently
enlarge the area of consumption to better align with the provided generation
and thus demonstrate that it is possible to ease tension in the electrical
system by the cooperation of DSOs and TSOs while bridging across national borders. It is a new challenge for
– so far – locally oriented and distribution-centred smart grid developers to
establish vertical (distribution and transmission level) co-operation whilst
crossing national borders at the same time. More determination will be needed
in the deployment of smart grid technologies as smart grids provide promising
results in the managing of distributed and variable generation from renewable
sources, offering new customer side services, thus complementing traditional
infrastructures.

The Horizon 2020 Research and Innovation
Programme includes activities to facilitate the development of a
pan-European electricity grid that have been developed and will be implemented through
strong synergies with the Union's electricity infrastructure policy. They will
address among others the technological challenges posed by the medium- and
long-term infrastructure needs, in particular, the development, demonstration
and market uptake of innovative grid technologies to support the implementation
of the Northern Seas off-shore grid priority corridor, the electricity highways
and smart grids. The Connecting Europe Facility can successively
contribute to the industrial-scale roll-out of such technologies.

(b) 
Remaining priorities in gas

In gas, the long term objectives
remain a sufficiently diversified gas infrastructure to facilitate safe
supplies to the Union under attractive framework conditions. While the
investments in the current PCIs may broadly cover the long-term infrastructure
needs, nevertheless a number of expansions will be necessary:

– 
Europe needs to continue efforts to diversify its
supplies and to further expand the Southern Gas Corridor in order to increase
the diversification of supplies in particular in South-East Europe and to
achieve the medium-term political target to import about 10% of European demand
from the Caspian region and the Middle-East.

– 
The gas system must further increase flexibility
to respond to the needs of variable gas use, including through the development
of more LNG terminals and storages.

– 
Europe needs to promote indigenous production
and, as a first step, assess a more systematic recourse to on-shore and
off-shore indigenous sources of energy with a view to their safe, sustainable
and cost-effective exploitation, be it from new fields in the Eastern
Mediterranean, from biogas or unconventional sources insofar as they meet the
highest standards imposed by Union environmental legislation. All options to
transport gas from Eastern Mediterranean to the Union should be kept open, from
the already identified PCIs consisting of bringing Cyprus gas as LNG or through
a pipeline to Europe. All potential routes should be considered and assessed
both from an energy security point of view and from the point of view of their
relative economic costs and benefits.

(c) 
Longer term carbon-dioxide networks

Due to favourable market conditions for
coal and coal-fired power generation, the share of coal is again rising in the Union
energy mix. Latest developments in the field of carbon capture and storage have
been less encouraging as several carbon capture and storage projects seem to
stall due to unfavourable economic conditions. The Union should pursue its
efforts to develop a pan-European vision for a carbon-dioxide transport
network and identify first cross-border projects, in cooperation also with Norway.

Next steps towards implementing the longer term infrastructure vision:

• Prepare for the identification of projects of common interest in view of the review of the Union list in 2015 and beyond;

• Pursue discussions with the neighbouring countries on further integration of networks and the adequate regulatory frameworks, in particular in the framework of the Energy Community and of the MED-TSO;

• Ensure adequate support to the PECIs and other projects deemed of mutual interest under relevant Union financial frameworks;

• Explore how to best implement the concept of projects of mutual interest.

4.         Conclusions

This initial list of projects of common
interest is just the first step within a longer term infrastructure vision. The
 Union, including countries from the European Economic Area, should work
together in completing the single market for energy, removing all barriers to
the transmission of energy, including from renewable sources while maintaining
its high standards of supply security. However, the Union’s energy and hence
energy infrastructure vision is far broader than just the internal market.
Close co-operation should continue with members of the Energy Community,
neighbouring countries and strategic energy partners to develop projects of
mutual interest. The tools are there (third package and TEN-E Guidelines), all
this can be achieved step-by-step within a stable and attractive long-term
framework for infrastructure investments.

Annex I – ENERGY
INFRASTRUCTURE PRIORITY CORRIDORS AND AREAS[10]

1. PRIORITY ELECTRICITY CORRIDORS

(1) Northern Seas offshore grid (‘NSOG’):
integrated offshore electricity grid development and the related
interconnectors in the North Sea, the Irish Sea, the English Channel, the Baltic Sea and neighbouring waters to transport electricity from renewable offshore energy
sources to centres of consumption and storage and to increase cross-border
electricity exchange.

(2) North-South electricity
interconnections in Western Europe (‘NSI West Electricity’): interconnections
between Member States of the region and with the Mediterranean area including
the Iberian peninsula, notably to integrate electricity from renewable energy
sources and reinforce internal grid infrastructures to foster market integration
in the region.

(3) North-South electricity
interconnections in Central Eastern and South Eastern Europe (‘NSI East
Electricity’): interconnections and internal lines in North-South and East-West
directions to complete the internal market and integrate generation from
renewable energy sources.

(4) Baltic Energy Market Interconnection
Plan in electricity (‘BEMIP Electricity’): interconnections between Member
States in the Baltic region and reinforcing internal grid infrastructures
accordingly, to end isolation of the Baltic States and to foster market
integration inter alia by working towards the integration of renewable energy
in the region.

2. PRIORITY GAS CORRIDORS

(5) North-South gas interconnections in
Western Europe (‘NSI West Gas’): gas infrastructure for North-South gas flows
in Western Europe to further diversify routes of supply and for increasing
short-term gas deliverability.

(6) North-South gas interconnections in
Central Eastern and South Eastern Europe (‘NSI East Gas’): gas infrastructure
for regional connections between and in the Baltic Sea region, the Adriatic and
Aegean Seas, the Eastern Mediterranean Sea and the Black Sea, and for enhancing
diversification and security of gas supply.

(7) Southern Gas Corridor (‘SGC’):
infrastructure for the transmission of gas from the Caspian Basin, Central
Asia, the Middle East and the Eastern Mediterranean Basin to the Union to
enhance diversification of gas supply.

(8) Baltic Energy Market Interconnection
Plan in gas (‘BEMIP Gas’): gas infrastructure to end the isolation of the three
Baltic States and Finland and their dependency on a single supplier, to
reinforce internal grid infrastructures accordingly, and to increase
diversification and security of supplies in the Baltic Sea region.

3. PRIORITY OIL CORRIDOR

(9) Oil supply connections in Central
Eastern Europe (‘OSC’): interoperability of the oil pipeline network in Central Eastern Europe to increase security of supply and reduce environmental risks.

4. PRIORITY THEMATIC AREAS

(10) Smart grids deployment: adoption of
smart grid technologies across the Union to efficiently integrate the behaviour
and actions of all users connected to the electricity network, in particular
the generation of large amounts of electricity from renewable or distributed
energy sources and demand response by consumers.

(11) Electricity highways: first
electricity highways by 2020, in view of building an electricity highways
system across the Union that is capable of:

(a) accommodating ever-increasing wind
surplus generation in and around the Northern and Baltic Seas and increasing
renewable generation in the East and South of Europe and also North Africa;

(b) connecting these new generation hubs
with major storage capacities in the Nordic countries, the Alps and other
regions with major consumption centres; and

(c) coping with an increasingly variable
and decentralised electricity supply and flexible electricity demand.

(12) Cross-border carbon dioxide network:
development of carbon dioxide transport infrastructure between Member States
and with neighbouring third countries in view of the deployment of carbon
dioxide capture and storage.

Annex
II – Maps of projects of common interest

Annex III: 10% interconnection target in
electricity before and after the PCIs

Annex III:
Supply source diversification before and after the implementation of the
projects of common interest in the field of gas

Number of supply sources a country may
potentially access through infrastructure
(at least 5% share)

Supply Sources: Azerbaïdjan, Algeria, Lybia, Norway, Russia, National Production, for simplification, LNG is depicted as one
source, but the pattern indicates which countries have access to LNG. This
graph does not prejudge any commercial contracts.

Source: ENTSO-G TYNDP 2013, Commission

Annex IV: Compliance with the N-1
infrastructure standard before and after the implementation of the PCIs

Reference: Article 9 of Regulation (EU)
No 994/2010

[1]               N-1 standard, see Regulation (EU) No 994/2010, OJ L
295, 12.11.2010, p. 1–22

[2]               Study on the Benefits of an integrated European
energy market, 2013, Booz&Co; http://ec.europa.eu/energy/infrastructure/studies/doc/20130902_energy_integration_benefits.pdf

[3]               COM (2010) 677 final

[4]               Regulation (EU) No 347/2013, OJ L, 25.4.2013, p.39

[5]               See Annex I.

[6]               COM(2011) 539 final

[7]               C(2013) 6766 final

[8]               http://ec.europa.eu/energy/infrastructure/pci/doc/20130724_pci_guidance.pdf

[9]               Study on the Benefits of an integrated European
energy market, 2013, Booz&Co.

[10]             Excerpt from Annex I of TEN-E Regulation (EU) No 347/2013